Question
If the going market rate of interest is 4%, how much would you have to invest each and every year to have $1,000,000 at the
If the going market rate of interest is 4%, how much would you have to invest each and every year to have $1,000,000 at the end of 20 years?
If the going market rate of interest is 12%, how much would you have to invest each and every month to have $1,000,000 at the end of 3 years?
You win the lottery for $20 million, payable in a lump sum or $1 million per year for 20 years. If the market rate of interest is 8%, what would your lump sum payment be before taxes?
You need to save $30,000 for a new car, and you estimate that your car will last another 3 years at best. If the market rate of interest is 5%, how much would you need to save each year for the next three years to purchase a car costing $30,000?
Problem #2
XYZ issues a $1,000,000 bond that matures in 5 years on January 1, 2012. The bond pays interest annually and has an interest rate of 4% and the market rate is 6%.
Calculate the value of the bond. Give the entry to record the note on January 1, 2012. Give the entry required on December 31, 2012, which should include the payment of interest. Use the straight-line method. Give the entry required on December 31, 2012, which should include the payment of interest. Use the effective-interest method.
Problem #3
XYZ issues a $1,000,000 bond that matures in 5 years on January 1, 2012. The bond pays interest annually and has an interest rate of 4% and the market rate is 2%.
Calculate the value of the bond. Give the entry to record the bond on January 1, 2012.
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